At the time of this writing, Toys “R” Us has declared Chapter 11 bankruptcy, Sears Holdings Corporation, the parent of national retailler Sears, is down to $7 a share (from over $40 in 2015) and other name brand stalwarts of the 20th Century economy may not be far behind on their way to history’s dustbin. Why is it that the very smart and highly compensated individuals who run these companies can’t see their way to maneuver away from rocks so clearly on the horizon?
Being no stranger to having worked under a corporate practice model, I think I know the answer, and it’s a four letter word: fear. While certainly companies differ in the degree to which fear drives decision-making, one can argue that the Kodak’s, the Blockbusters, and the RCA’s of eras past couldn’t get out of their own way fast enough because their prior successes were the entirety of their “bag of tricks,” as well as their security blanket. While fear may drive companies to start scrambling to avoid an impending hazard, fear also limits the potential solutions, which may then be too little, too late. For executives, the fear of rejection, fear of damaging one’s credibility, fear of pissing off the boss, fear of income loss–these are all anathema to creativity at a time when creative solutions are needed most. Companies that persist with executive cultures that reward this sort of knee-jerk conservatism are most at risk.
A fascinating book I just finished reading again, eBoys by Randall E. Stross, recounts the true story of “six tall men” who formed a scrappy venture capital firm starting in the mid-1990’s that was instrumental to the growth of eBay and subsequent other Silicon Valley success stories like Twitter, Snapchat, and Dropbox. One of the old era companies the firm was retained to help transform was none other than the aforementioned Toys “R” Us. The toy company’s CEO knew of the importance of establishing an online foothold, but the executive team and board seemed never able to reconcile the concept of that foothold eventually growing to the point that it could cannibalize the parent. The partnership of Benchmark, the venture capital firm, and Toys R Us, soon collapsed because of the culture clash of old economy and new economy. I suppose there is a Pyrrhic victory in Toys “R” Us surviving this long AA (After Amazon), but here we are–the damage has been done and it’s probably fatal.
It’s clearly much easier to exercise common sense as an outsider doing a post-mortem analysis of companies like Toys “R” Us then it is to figure out how to navigate out of the hurricane when one is in it. Writing this sitting in the comfort of my oh-so-hip coworking/incubator space in Southern California, the reason for the ease are the tools at hand. Abstractly, the world is your oyster. If one is struggling in a hurricane, get a bigger boat. Better yet, get off the boat and find a piece of dry land where hurricanes aren’t an issue. Concretely, you’re on the boat in the hurricane, the boat is listing, and your options are down to finding rags to plug the holes and, if that fails, to abandon the ship. The latter choices are the limited toolkit with which most, if not all, of the old economy companies contend. Their tools are limited because of the legacy of the boat itself. No one seems to have the foresight, or courage, to abandon ship when the waters are still calm.
Easy or not, under penalty of death, common sense must prevail. Applying it, the simplest of approaches may be the best one: Never mind the past–start with a blank slate. Given the context and inertia of most companies, is it hard to afford? Absolutely. But if one understands (as my stockbroker is quick to point out) that past performance is no guarantee of future gains, one needn’t continue to prop up the illusion that today is the same as yesterday. It isn’t. The question no longer becomes what rags can we scrounge up but, instead, what island, or as Elon might proffer, what planet do we move to?
The path to success may not be led by the wizened, crusty veteran, who is helplessly imprisoned in the past, but perhaps under the slightly know-it-all but exceptionally smart young (or young at heart) graduate. So here’s to my fellow creatives; to Instagram selfies, coworking spaces, Miller High Life, big bushy beards, and tattoos aplenty. Brave new world, here we come.